You likely know that you should be saving money. But do you know how to take your financial situation to the next level, and start investing?
Saving is great. It helps us get through emergencies or spend money on important things. But if you leave all your cash in a savings account it won’t beat inflation. That means $100 today probably won’t equal $100 a few decades from now.
This is why it’s important to also make sure you’re investing a chunk of your money. By allowing your money to grow with investments, you are able to make a profit and provide a cushion against inflation thanks to compound interest.
The good news? Just getting started with investing is a lot easier than you probably think.
Opt for Your Company 401k
The easiest way for most people to start investing is to enroll in a 401(k) plan through their employer. A 401(k) plan is a retirement plan created by employers where their employees can save and invest a portion of each paycheck before taxes. The taxes aren’t applied until you withdraw the money.
Most 401(k) plans offer a variety of mutual funds and options to invest in. The really good plans are the ones that offer an employer match. Your employer will match a percentage of your contribution. This is basically free money being put into your retirement savings by your employer.
Even if your employer doesn’t offer a company match, it’s still a good idea to set up your 401(k) so that your contributions are automatic. Setting it up is as easy as going to HR and filling out some paperwork. A retirement plan is one of the employer benefits you should be doing your absolute best to maximize.
Consider an IRA
An IRA is an Individual Retirement Account you can open with a financial institution to save and invest money for retirement. If your company doesn’t offer a 401(k), this is usually a good place to start.
There are two common types of IRAs that you’ll likely open for yourself.
The first is a traditional IRA, in which you can make tax-deferred contributions. That means you won’t be taxed on the money you put in today, but you will need to pay taxes when you withdraw that money in retirement. (This works just like a 401(k).)
The second is a Roth IRA. Your contributions are taxed now, but your earnings can grow tax-free because you don’t pay taxes on the withdrawals.
Setting up an IRA is also very simple. Simply visit your financial institution of choice and open your account online. Funding methods, fees, and minimums differ among institutions so make sure to shop and compare.
If you work for yourself, you should also look to see if you qualify for a SEP IRA. This post will help you identify a number of other options that you can start investing with for retirement if you’re self-employed.
All of these IRA options come with their unique tax benefits and scenarios, so it would be wise to do a little digging and see which one works best for you.
Work with a Fee-Only Financial Planner
Sometimes the best way to start investing is to get some help. In this case, help refers to a fee-only financial planner who follows the fiduciary standard.
Fee-only means that advisors don’t receive commissions for any recommendations, and they don’t push products or try to make sales to enrich themselves. They get no kickbacks and are only paid directly by their clients.
Choosing a fee-only financial advisor helps ensure that you’re receiving advice that is unbiased because an advisor’s income is not contingent upon what products they sell to you.
A fiduciary works in your best interests at all times. These individuals have legal and ethical standards they must adhere to. For example, the fiduciary is bound by law to act in the best interest of their clients. They also aren’t allowed to benefit personally from the management of assets.
Before working with any financial advisor, they should sign a fiduciary oath for you. All advisors with XYPN have this oath signed and attached to their profiles on the Find an Advisor portal.
Getting started investing for retirement can be as easy as talking to HR, opening an IRA online, or finding a good financial planner. If investing still seems overwhelming, commit to taking just one of these steps today.
About the Author: Amanda Abella is an Amazon bestselling author, speaker and personal finance expert who helps millennials make money their honey through online business. She has built an online brand that touches thousands each month and has been featured in Forbes, The Huffington Post, Seventeen Magazine and more.